Credit Basics

Some old stats

• 83% of college students have at least one credit card

• 45% of college students are in credit card debt– Average debt over $3000

• The average household with debt carries approximately $10-12,000 and has 9 credit cards

• Americans shelled out more than $24 BILLION dollars in credit card fees in 2004

Cost of Credit

• APR - Annual Percentage Rate– Amount it costs you a year to sue credit, expressed as a percentage rate

• Annual Fee– Usually used by credit card companies

• Finance Charge– Actual dollar cost of using credit

• Origination Fee– A charge for setting up a loan

Credit Cards

• APR• Annual Fee• Grace Period• Minimum payment• Credit limit

Installment Loans

• Make payments in a regular basis usually for large purchases.– Car– Appliances– Interest rates usually lower than credit cards

Student Loans

• Usually carry lower interest rates

• Usually allow you to defer payments until after you graduate

Mortgages

• Home loan• Usually 15-30 years• Large amount borrowed

Credit Report

• A record of your financial transactions– Loans you have applied for– Loan amounts you have received– Whether you pay your bills on time

– For the past 7-10 years

Credit Reporting Agencies

• Equifax• Experian• Trans Union

C’s of Credit

• Capacity - ability to repay• Character - paying on time• Capital - have items of value

Bankruptcy

• Chapter 7 - erases most of debt– Unemployed/very low income– Counseling

• Chapter 13 - pay back debt but with more time– Court oversees payment plan

• WARNING - stays on credit report for 10 years and it becomes very difficult to get credit